Apple continues to struggle to establish a supply chain in India

Posted:
in General Discussion edited March 2020
In the midst of ongoing attempts to diversify its supply chain, a new report outlines some of the trouble Apple is running into, while establishing a manufacturing foothold in India.

A Foxconn employee in India. Iamge via Bloomberg.
A Foxconn employee in India. Iamge via Bloomberg.


Apple has long made the majority of its products in China. That reliance has made the company vulnerable to events like the U.S.-China trade war and the more recent coronavirus outbreak. And while Apple has explored manufacturing in other countries, India has been one of its trickiest prospects.

A new report from The Information details some of the reasons why producing mass market smartphones in India has been difficult for Apple.

Apple's struggle to find an Indian supply chain

For one, the manufacturing industry in India is less developed, and compared to China, there's a shortage of highly skilled labor or manufacturers able to produce components like smartphone speakers or headphones.

It's also proven difficult for Apple to find local suppliers that can comply with its stringent responsibility policies. One company, Superpacks, was found to be in violation of about a dozen of those policies. After months of missed deadlines and lack of communication, Apple dropped them as a business partner.

Part of the reason why firms aren't improving factories or the conditions within is the size of Apple's orders in India. Order sizes in the country are estimated to be in the thousands per month, while Apple orders in China can reach hundreds of thousands per week.

Government manufacturing regulations and import duties also play a part. But while the Indian government has been hesitant to shower Apple with tax incentives, local media reports indicate that Apple recently pledged to spend $1 billion in the country.

Apple is also said to be in the midst of disputes over unpaid taxes. Local regulatory filings found that Apple had $75 million in taxes in 2019, up from $7.7 million in 2016.

There are plenty of other challenges to producing in India, such as the need to import raw materials, the poor quality of India's roads and the fact that finding factory land would be difficult because Indian landowners have more rights than those in China.

Apple's necessity for Indian manufacturing

Apple CEO Tim Cook has called India a "huge opportunity" for the company, but it seems like Apple's efforts to set up manufacturing lines there are aimed at the local, rather than global, market.

The Indian government requires single-brand smartphone makers to spend at least 30% on locally produced components. Import duties on foreign-made smartphones also drive up the cost of iPhones, placing them out of reach of many Indian consumers.

In other words, Apple's efforts in India appear to be focused on tapping into the massive smartphone market there, rather than finding an alternative to China.

On Friday, Cook told Fox Business News that the coronavirus wouldn't require a major shift in its supply chain. For Apple to move its primary manufacturing out of China, Cook said a new region would need to meet a number of requirements, including quality, depth of engineering and time to market.

Apple's ongoing efforts in India

Apple currently produces several models, like the iPhone XR, at Wistron and Foxconn plants in India.
Apple currently produces several models, like the iPhone XR, at Wistron and Foxconn plants in India.


Despite the hiccups, Apple appears to be soldiering on in India. Apple produces several smartphone models at Wistron and Foxconn facilities, including the iPhone XR, iPhone 6s and iPhone SE.

The India production has allowed it to meet local sourcing requirements and cut costs, the latter being an important consideration due to import tariffs and the budget of many Indian consumers.

Apple is also set to open its first Apple Store there next year, and will launch an online retail presence by the end of 2020. Apple's iPhone was also the fastest growing premium smartphone brand in India throughout 2019, research from Counterpoint showed.
Bart Y

Comments

  • Reply 1 of 12
    Oh no!! Apple is Doomed! Everything takes time. As you mentioned in the last paragraph.. Apple is soldiering on.
    StrangeDaysBeatslkruppBart Y
  • Reply 2 of 12
    It took China 30 years to get to where it is at today. India has a large population, it will get there eventually.
    lkruppStrangeDays
  • Reply 3 of 12
    spice-boyspice-boy Posts: 1,450member
    If you see Tim carrying a bunch of eggs advise him to divide them in several baskets. 
  • Reply 4 of 12
    Mike WuertheleMike Wuerthele Posts: 6,553administrator
    If you can't see your comment, refer to the commenting guidelines as to why. 

    If you don't know what you did after the review, you were probably caught up in the sweep of the original post.
  • Reply 5 of 12
    tokyojimutokyojimu Posts: 519member
    I spoke to a garment company that tried to move production from China to India. He said the quality control was so bad they had to give up. 
    viclauyycBart Y
  • Reply 6 of 12
    SoliSoli Posts: 10,033member
    Oh no!! Apple is Doomed! Everything takes time. As you mentioned in the last paragraph.. Apple is soldiering on.
    I thought that said "Apple is soldering on," which I thought was clever.

    tokyojimu said:
    I spoke to a garment company that tried to move production from China to India. He said the quality control was so bad they had to give up. 
    Far too many people think that low-cost + population are the only factors you need, but China and India are vastly different in industry. India might be able to get to where China is today, but it will be absolutely be a slower process than it took China. For better or worse, there are benefits to Chinese culture and government for Western production needs.
    viclauyycjony0FileMakerFeller
  • Reply 7 of 12
    shrave10shrave10 Posts: 36member
    Far too many people think that low-cost + population are the only factors you need, but China and India are vastly different in industry. India might be able to get to where China is today, but it will be absolutely be a slower process than it took China. For better or worse, there are benefits to Chinese culture and government for Western production needs. The benefits are sometimes referred to as slave labour. Just because other countries respect worker rights more should not allow one that does not do so to dominate manufacturing. Tariffs and quotas are needed to protect human rights. Industrial manufacturing costs / efficiency should not be the only criteria that companies need to follow for selling to a country's consumers
    FileMakerFellerBart Y
  • Reply 8 of 12
    tzeshantzeshan Posts: 2,351member
    It took China 30 years to get to where it is at today. India has a large population, it will get there eventually.
    Amen!
  • Reply 9 of 12
    kevin keekevin kee Posts: 1,291member
    spice-boy said:
    If you see Tim carrying a bunch of eggs advise him to divide them in several baskets. 
    That will work if the basket are all equal quality.
    FileMakerFeller
  • Reply 10 of 12
    tzeshantzeshan Posts: 2,351member
    kevin kee said:
    spice-boy said:
    If you see Tim carrying a bunch of eggs advise him to divide them in several baskets. 
    That will work if the basket are all equal quality.
    This is democracy. 
  • Reply 11 of 12
    knowitallknowitall Posts: 1,648member
    Perhaps start producing in another third world region like ... eh ... Europe.
    Might be a lot easier.
    FileMakerFeller
  • Reply 12 of 12
    tundraboytundraboy Posts: 1,844member
    Someone I know who was the area manager for Asia of a large manufacturer said that the business environment in India vs China is like night and day.  He says if not for India's large market, they would not have bothered setting up manufacturing facilities there.  Furthermore, without deep structural changes, especially with respect to government regulation and bureaucracy (but not limited to that), he doesn't foresee India becoming anything like the international manufacturing powerhouse that China is. And maybe India doesn't really aspire to that.

    Apple has its work cut out for it in India and whoever is in charge of India deserves serious consideration as future CEO if he or she succeeds.
    edited March 2020 FileMakerFellerBart Y
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